UPDATE 1-Mothercare eyes Royal baby "feelgood factor"

Reuters Staff

4 Min Read

* Mothercare looking to capitalise on imminent birth

* Q1 UK underlying sales down 0.9 pct

* Q1 international retail sales up 11.1 pct

* Shares fall up to 7 pct

By James Davey

LONDON, July 18 (Reuters) - British mother and baby products retailer Mothercare is hoping the imminent birth of the nation’s heir to the throne will provide a fillip to the business after it reported a drop in sales in its home market in the latest quarter.

Many retailers are finding the going tough as consumers, whose spending generates about two-thirds of British gross domestic product, fret over job security and a squeeze on incomes.

Mothercare has been particularly hard hit because it faces intense competition from supermarkets and internet players.

The firm, which operates in 60 countries, said on Thursday sales at British stores open over a year fell 0.9 percent in the 15 weeks to July 13, its fiscal first quarter, compared with the same period last year, sending its shares down up to 7 percent.

However Chief Executive Simon Calver, in the second year of a three-year turnaround plan aimed at revitalising its loss-making British business, said the firm was well placed to capitalise on the arrival of Prince William and his wife Kate’s first child, due any day.

He said Mothercare had put together a celebration range that included “Born to Rule” sleepsuits and “Princess/Prince in Training” bibs and vests, while the flagship Oxford Street store in central London would be transformed to mark the occasion.

“It’s hard to gauge what sort of increase we have. I think they’ll be a feelgood factor and who knows in nine months time there may even be a tick-up in the birth rate,” Calver said.

The company’s performance in the latest quarter compares with a weak outcome in the same quarter last year when like-for-like sales slumped 6.7 percent.

ONLINE SALES UP

Though analysts had forecast growth of up to 2 percent, Calver said the outcome was consistent with his expectations for the full 2013-14 year of a 1-2 percent fall in UK like-for-like sales and a possible return to growth in the following year.

While clothing sales and volumes benefited from the launch of new ranges, especially a new value range in July last year, toys and home & travel in particular were hit by an increasingly promotional market, Mothercare said.

The first quarter outcome would have been worse were it not for a 14.6 percent rise in online sales.

Mothercare is improving product ranges and delivery services. British stores are also being revamped and unprofitable ones closed - 56 were closed in 2012-13 and 13 in the first quarter of 2013-14, taking the UK total to 242.

The group’s overseas arm has been more fruitful, with international retail sales up 11.3 percent in constant currency.

It opened a net 47 stores overseas during the quarter, taking the total to 1,116 abroad.

Shares in Mothercare, which have more than doubled over the last year, were down 32.5 pence at 439 pence at 0938 GMT, valuing the business at 391 million pounds.

“We view 2013-2014 (profit) as being fully underpinned by store closures, with limited forecast risk. However, with the market already factoring in a further doubling of earnings in 2014-15 the shares look up with events,” said Peel Hunt analyst John Stevenson.